Cloisters’ Sarah Fraser Butlin analyses the important Supreme Court case on worker status which was handed down today.
For those of us involved in the gig economy and other employment status cases, the long awaited judgment of the Supreme Court in Pimlico Plumbers has arrived. But does it answer all the questions that have been buzzing around over the last few years? Does it radically transform and clarify the law so that there is a bright line that we can follow to distinguish between the truly self-employed, a worker and an employee?
In short, no.
The judgment provides some further guidance on personal substitution and whether someone is a client or customer. But the Justices sidestepped two bigger questions: whether an extended employee in the Equality Act 2010 is the same as a s230(3)(b) Employment Rights Act 1996 worker, and whether mutuality of obligation between assignments is relevant to worker status. On those we shall have to await judgments in the future.
But the judgment is not without some highlights. It is clear that the Supreme Court took a fairly dim view of Pimlico’s “choreography” in their contractual documentation. Lord Wilson, giving the only judgment, highlighted Pimlico’s attempts in the same documents to present the plumbers to the public as its workforce, yet render them self-employed at the same time. The choreography was even more stark given their further objective to “exert a substantial measure of control” over them (§16). They criticised the “confusing” terms of a contract that had been introduced after Mr Smith’s termination, which Pimlico had then put before the Tribunal: “So Pimlico there put before the tribunal an irrelevant contract, cast in highly confusing terms, and now complains that the tribunal’s interpretation of them was highly confused” (§27).
But we should return to the substance of the judgment.
A word on terminology
Firstly, a word on terminology. There are effectively three categories of status with which we are concerned. An employee: they have a contract of service, giving rights to, amongst other things, unfair dismissal. Then there is the worker definition in s230(3)(b) Employment Rights Act 1996 which provides that someone is a worker where they are an individual who has entered into or works under:
“(b) any other contract…whereby the individual undertakes to …. perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual….”
This is aligned to the definition in the Working Time Regulations 1998.
Finally, there is the definition of an extended employee in the Equality Act 2010. That does not have the “not a client or customer” element that is found in the s230(3)(b) definition.
Lord Wilson giving the judgment of the Court summed up the feelings of many of us:
“It is regrettable that in this branch of the law the same word can have different meanings in different contexts. But it gets worse. For, as I will explain, different words can have the same meaning” (§7).
The Court did not repeat Etherton MR’s five point analysis from the Court of Appeal judgment on when substitution would displace personal service and there are certainly some nuances in today’s judgment that suggest a slightly different approach.
The Court held that just because someone can have assistance on a job or bring in a specialist for part of it does not amount to substitution of personal performance. They assumed, without deciding, that Mr Smith did have a contractual right to arrange for someone else to undertake work that he had agreed to do if, for example, he was offered more lucrative work elsewhere. While this right was not restricted to days when Mr Smith was unable to do the work, it was nevertheless highly restrictive. He could only use a substitute that came from within the ranks of Pimlico operatives i.e. “those bound to Pimlico by an identical suite of heavy obligations” (§34). This was the opposite of the situation in Halawi where, it had been held, WDFG were “uninterested in the identity of the substitute” (§34).
So how do we determine the degree of substitution that may apply before personal service will be ousted? There is no “sole test” (§32). Nevertheless there are cases, such as this, where it is “helpful to assess the significance of [the] right to substitute … by reference to whether the dominant feature of the contract remained personal performance on his part” (§32).
But what does this really mean? Is it, in essence, a question of fact and degree? How heavy do those obligations binding the substitute have to be? What if the claimant’s obligations are of a different order to those of the potential substitute? Assistance and specialist support will not constitute substitution but how far might assistance be permitted to go before it crosses into someone taking over the job?
Importantly it seems that the Supreme Court has taken a step away from Etherton MR’s focus on the “conditionality” of the substitution requirements and instead of focusing on the mechanism for substitution, they have placed greater emphasis on the end result. And so, what we do know is that “unable or unwilling” is no longer the key test in substitution cases, rather one must look to the dominant feature of the relationship.
Not a client or customer
Once again the Court said there is “no single key” to unlock the meaning of this phrase. Instead, Lord Wilson pointed to three cases “which may prove to be of some assistance” (§43). Firstly, Cotswold Developments in which it was said that the focus should be on whether the individual actively markets their services to the world in general. Secondly, Hashwani and whether there was a relationship of subordination with the putative employer. Thirdly, a CJEU authority, which he said should be applied cautiously, FNV Kunsten Informatie en Media, considering the degree of economic risk taken on by the individual.
In this case, the Court were firmly of the view that Mr Smith was not an independent contractor. Having set out the factors relied upon by Pimlico, Lord Wilson said:
“On the other hand, there were features of the contract which strongly militated against recognition of Pimlico as a client or customer of Mr Smith. Its tight control over him was reflected in its requirements that he should wear the branded Pimlico uniform; drive its branded van, to which Pimlico applied a tracker; carry its identity card; and closely follow the administrative instructions of its control room. The severe terms as to when and how much it was obliged to pay him, on which it relied, betrayed a grip on his economy inconsistent with his being a truly independent contractor. The contract made references to “wages”, “gross misconduct” and “dismissal”. Were these terms ill-considered lapses which shed light on its true nature? And then there was a suite of covenants restrictive of his working activities following termination.” (§48)
Even more tellingly, he concluded:
“Accurate though it would be, it would not be a proper disposal of this issue to describe this court’s own conclusion to be that Pimlico cannot be regarded as a client or customer of Mr Smith. The proper disposal is, of course, for it to declare that, on the evidence before it, the tribunal was, by a reasonable margin, entitled so to conclude.” (§49)
And so once again, we have a set of factors to consider, weigh and balance to determine the question of whether the test of “not a client or customer” is fulfilled or not. A further question of fact and degree…
It certainly does not provide certainty, either for workers or employers, nor for us as we advise clients. But it does provide flexibility and a means of keeping the law in step in an ever changing labour market where new structures, methods of working and technology are emerging rapidly.
What have they not addressed?
The geek in me is rather disappointed about this. The Justices neatly sidestepped two issues which many of us were hoping that they would take the opportunity to resolve.
Firstly they have not addressed whether there is a difference between the meaning of worker in s230(3)(b) ERA 1996 and an extended employee in the Equality Act 2010. “Notwithstanding the murmurs of discontent” expressed by Ms Monaghan on behalf of the Claimant, the court was not invited to review its elision in Bates van Winkelhof of the two concepts. Therefore the Court proceeded on the basis that it was “conceptually legitimate as well as convenient” to treat the definitions as the same (§15).
Secondly, because the Court accepted that the lower courts were entitled to find that an umbrella contract was in place, then they declined to determine whether and to what extent mutuality of obligation between assignments was relevant to a person’s status during assignments (§41). As the Court themselves said there is not an easy answer to this question and despite the “energetic submission” of Ms Monaghan QC, it would have to await appraisal on another occasion.
There has been lots of debate about both of these questions. They raise substantial and difficult questions. But that is for a blog on another day.